How Walmart came to embrace sustainability more than frontline workers’ pay

Author Rick Wartzman details how CEO Doug McMillon helped curb the negative press aimed at Walmart, but also asks why the company isn’t paying workers more.
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Photo: John Huggins

· 4 min read

Rick Wartzman is a journalist and business historian. His new book, Still Broke: Walmart’s Remarkable Transformation and the Limits of Socially Conscious Capitalism, will be published on November 15. Wartzman details the boldness of Walmart executives adopting green initiatives and raising pay. And while lauding both, as the title makes clear, he ultimately concludes that Walmart and other companies fall short when they choose not to pay workers a living wage.

This is the conclusion of a two-part interview. Part 1 detailed how Walmart began to turn the tide of negative publicity toward it in 2005 with its recovery efforts following Hurricane Katrina. This interview has been edited and condensed for clarity.

How did Walmart begin to shape its climate policies that are so highly regarded today?

Back in 2005, when they were just beginning all the environmental stuff, there were secret meetings. The environmentalists didn’t want to be seen going to Bentonville [Arkansas, Walmart’s headquarters] and meeting with Walmart. And Walmart didn’t want to be seen meeting with a bunch of lefty environmentalists. And so these were all hush-hush kinds of talks. They brought in the Environmental Defense Fund and Conservation International and others, and they really did hear what they had to say, and they ended up working very closely with them to structure meaningful environmental and sustainability programs…Walmart is widely and rightly recognized as a sustainability leader, certainly among retailers, but really among the corporate community at large.

But on the labor front, at the same time, you point out that between 2007 and 2013, the average Walmart went from having 338 employees to 281 employees.

Some of that was just a reflection of their incredibly high turnover. But they were also trying to… cut labor costs mainly…The next year, 2014, Doug McMillon comes in as the new CEO and Walmart was a mess…partly because they had squeezed labor costs. Their customer service was really suffering. Their shelves were empty. They couldn’t get stuff out of the stockroom and restock shelves.

There had been a decade of pressure from the unions and labor activists, politicians, from the interfaith community—all saying, “You don’t pay your workers enough. You have your workers on food stamps, that’s not right.”…And, you know, I think Doug realized he had to do something.

What was the starting wage at Walmart at the time?

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The average starting wage for a Walmart worker was $7.65 an hour…And the management team goes into the board meeting where they finally say, “We’ve got to take this step. We finally have to raise the starting wage.” And they propose going from this average of $7.65 an hour to $8.25 an hour.

And it was a board member that pushed them to go higher, right?

Jim Cash, who’s…an emeritus professor at Harvard Business School…He really is the one who pushed them to move higher, and they ended up getting to $10 an hour, and good for them.

Walmart’s starting wage now is $12 an hour. So they’ve continued to raise wages—their average wage is now $17.06…In my view, more corporations need to move in the direction that Walmart has moved. But at the end of the day, the whole point of the book, and why it’s called Still Broke, is because after all of this awakening, this pressure, they finally get around to doing something on the worker side. But after all of it, the average Walmart worker still makes less than $29,000 a year. And that’s not a living wage.

You mentioned in the book that Henry Ford, who certainly wasn’t known as a bleeding-heart liberal, famously doubled factory workers’ pay to $5 a day in 1914. What was his thought process there?

He had sort of two thought processes. One is that they would become more productive workers; you’re investing in your workers so they’re going to work harder, they’re going to be more loyal, and they’re going to do a better job. So that was one and two…there was this kind of logic—and this was commonly held wisdom in those days—that companies would pay their workers enough so that then it would feed the consumer economy that kept the wheels turning.

And the flip of that is what some call “secular stagnation,” a fancy economist term for people now getting paid so little, that maybe we can’t keep the consumer economy humming like it once was. And you now have big retailers, including Walmart, cite in their federal financial filings: That is a risk, that there are so many people who just don’t have the incomes to be consumers. That’s a material risk to our business going forward.

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